Subcommittee: Extend Net Tax Moratorium

Before going on recess this month, a House of Representatives Judiciary subcommittee approved by voice vote a bill that would extend the moratorium on sales taxes for online purchases through October 2006 and would permanently ban Internet access taxes.

The bill, called the Internet Non-Discrimination Act and sponsored by Rep. Christopher Cox, R-CA, is expected to reach the full Judiciary Committee and House floor in September when legislators return from the August recess.

Congress passed the original moratorium, the Internet Tax Freedom Act, in October 1998, imposing a three-year moratorium on Internet access and sales taxes. With that act set to expire Oct. 21, Congress is considering several proposals.

Reps. Bob Goodlatte, R-VA, and Rick Boucher, D-VA, have introduced a bill that would permanently extend the ban on Internet access taxes and sales taxes. Unlike Cox's bill, they also seek to simplify the current nexus standard, which requires marketers with a physical presence in a state to pay tax on sales to customers who live in that state.

Rep. Mel Watt, D-NC, wanted to address the nexus issue in Cox's bill with an amendment giving states five years to simplify their sales tax codes before Congress revisits the issue in 2006. Rep. Bob Barr, R-GA, chairman of the Judiciary subcommittee, refused to allow a vote on the amendment, saying it was unrelated to the matter at hand.

In the Senate, there has been little movement on a bill introduced in February by Sen. Ron Wyden, D-OR, that would extend the sales tax moratorium through Dec. 31, 2006, and would encourage states to transition toward a uniform tax code for Internet usage.

Marketers applauded the Cox bill.

While all the movement in Congress points to extending the sales tax ban, Wyoming Gov. Jim Geringer urged Congress this month to allow states to tax e-commerce sales.

Speaking on the opening day of the National Governors Association summer meeting in Providence, RI, Geringer warned that without such a tax, states stand to lose more than $30 billion in revenue by 2003.

Geringer and the 39 other governors who attended the four-day conference worked to developed a uniform tax system.

"Anyone who wants to sell nationally would have only one set of tax rules to comply with," he said. He estimated that about 20 states have already enacted enabling legislation for such rules.